Capital Requirements

12 Months Ended

Dec. 31, 2011

Capital Requirements

Capital Requirements

(16) Capital Requirements

        The Company and its subsidiary bank are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and HBC must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

        Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of December 31, 2011 and 2010, the Company and HBC met all capital adequacy guidelines to which they were subject.

        As of December 31, 2011 HBC was categorized as "well-capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since December 31, 2011 that management believes have changed the categorization of the Company or HBC as well-capitalized.

        The Company's consolidated capital amounts and ratios are presented in the following table, together with capital adequacy requirements.

	Actual					To Be Well-Capitalized Under Prompt Corrective Action Provisions					Required For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2011
Total Capital	$	211,604		21.9	%	$	96,755		10.0	%	$	77,404		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	199,423		20.6	%	$	58,056		6.0	%	$	38,704		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	199,423		15.3	%		N/A		N/A		$	52,103		4.0	%
(to average assets)
As of December 31, 2010
Total Capital	$	197,763		20.9	%	$	94,533		10.0	%	$	75,626		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	185,775		19.7	%	$	56,725		6.0	%	$	37,817		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	185,775		14.1	%		N/A		N/A		$	52,665		4.0	%
(to average assets)

        HBC's actual capital and required amounts and ratios are presented in the following table.

	Actual					To Be Well-Capitalized Under Prompt Corrective Action Provisions					Required For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of December 31, 2011
Total Capital	$	190,904		19.7	%	$	97,004		10.0	%	$	77,603		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	178,697		18.5	%	$	57,956		6.0	%	$	38,637		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	178,697		13.7	%	$	65,266		5.0	%	$	52,212		4.0	%
(to average assets)
As of December 31, 2010
Total Capital	$	171,185		18.1	%	$	94,577		10.0	%	$	75,662		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	159,192		16.8	%	$	56,753		6.0	%	$	37,835		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	159,192		12.1	%	$	65,836		5.0	%	$	52,669		4.0	%

        HCC is dependent upon dividends from HBC. Under California General Corporation Law, the holders of common stock are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available. The California Financial Code provides that a state-licensed bank may not make a cash distribution to its shareholders in excess of the lesser of the following: (i) the bank's retained earnings; or (ii) the bank's net income for its last three fiscal years, less the amount of any distributions made by the bank to its shareholders during such period. However, a bank, with the prior approval of the Commissioner, may make a distribution to its shareholders of an amount not to exceed the greater of (i) a bank's retained earnings; (ii) its net income for its last fiscal year; or (iii) its net income for the current fiscal year. Also with the prior approval of the Commissioner and the shareholders of the bank, the bank may make a distribution to its shareholders, as a reduction in capital of the bank. In the event that the Commissioner determines that the shareholders' equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As discussed in Note 12, HBC was prohibited from making such dividends to HCC without prior regulatory approval, until the Written Agreement was terminated in June 2011. Similar restrictions applied to the amounts and sum of loan advances and other transfers of funds from HBC to the parent Company.